IDEAS home Printed from https://ideas.repec.org/a/taf/tprsxx/v62y2024i4p1189-1205.html
   My bibliography  Save this article

Optimal joint decisions of production and emission reduction considering firms’ risk aversion and carbon tax rate

Author

Listed:
  • Qi Qi
  • Shanling Li
  • Ren-Qian Zhang

Abstract

Carbon tax represents governments’ approach to steering the economy towards a greener future. Our research question focuses on the impact of carbon tax policy on a firm’s production decision and revenue and on total social welfare. In particular, we assume that a firm’s decision is subject to its behavioural considerations or, in other words, its risk attitude. We model a government plan to charge a carbon tax, and a risk-averse (or risk-neutral) firm needs to plan its production and estimate its profit if the carbon tax policy is implemented. We show that it is possible for a risk-averse firm’s optimal profit, in some cases, to be higher than that of a risk-neutral firm when facing a carbon tax. This implies that the risk-averse attitude is not necessarily harmful to the firm’s profit. For operations management scholars, our model highlights the importance of integrating firms’ behavioural responses into the carbon tax price. Our model suggests that for governments to implement carbon tax policy effectively, they should make carbon prices vary under certain conditions and not worry about price variation antagonising firms at large.

Suggested Citation

  • Qi Qi & Shanling Li & Ren-Qian Zhang, 2024. "Optimal joint decisions of production and emission reduction considering firms’ risk aversion and carbon tax rate," International Journal of Production Research, Taylor & Francis Journals, vol. 62(4), pages 1189-1205, February.
  • Handle: RePEc:taf:tprsxx:v:62:y:2024:i:4:p:1189-1205
    DOI: 10.1080/00207543.2023.2178833
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/00207543.2023.2178833
    Download Restriction: Access to full text is restricted to subscribers.

    File URL: https://libkey.io/10.1080/00207543.2023.2178833?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:tprsxx:v:62:y:2024:i:4:p:1189-1205. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/TPRS20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.